"So, You Need to Hire a Consultant?", M.E. Online Exclusive #2, March 2008

March 2008

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So, You Need to Hire a Consultant?

by Philip H. Francis

As an engineer or manager, you undoubtedly have met many situations in which you’ve had a need for a particular skill or field of expertise, but didn’t have it on hand. Or, you’ve sought an outside team to help you cope with a temporary scheduling crunch.

Perhaps you simply don’t want to spend your valuable time studying up in a niche area that you’ll likely never use again. It may be that your company needs a hot internal debate on a particular strategic or tactical issue.

All these various situations afford you good opportunities to enlist a good industrial consultant with whom you can work effectively. Any company, small or large, should staff itself with just the needs required for routine operations, allowing for normal growth. More than that is simply wasteful, ineffective, and costly. Consultants can step in to help with activities that are out of the routine.

This practical, short primer is intended to help you to know just why, when, how, and when not to use an independent consultant as you pursue your business agenda.

About Consulting

Industrial consultants have been with us for more than a century. Arthur D. Little is generally credited with creating the field when he was on the staff of MIT in the late 1880s. This field of concentration then was “technology research,” and his work shaped a budding industry into the giant that it is today. American financiers then were wary about investing in industrial research, and particularly in Little’s field of chemicals. He and his associate, Roger Griffin, stumped across America, making the case that it was in America’s competitive interest to establish a U.S. center for industrial research.

Today, consulting is worldwide in scope, ranging across a spectrum of industries and services—strategy, innovation, technology, industrial operations, information management, environmental issues, risk management, and corporate finance. Although Arthur D. Little was the pioneer in this field, now there are many fine industrial consultancies, large and small, for-profit and not-for-profit.

Today, industrial consultants can be very useful as a “third arm” for us—in some quite important ways. They can provide needed domain expertise, a qualified team, objectivity, latest tools and methodologies, and wisdom. They often can fix your problem when you don’t have the resources to do it yourself. They also may provide an alternate, better solution to hiring, training, and employing new people. Consultants are there for you when you need them, gone when you don’t. What’s more, using consultants allows normal operations to proceed apace, avoiding bottlenecks and delays in serving your customers.

Every consultant or firm has its own particular core competencies for which it is known, so you need to pick the right partner for your particular needs. Here’s a simple, convenient three-tier classification describing this industry today:

Large, multinational companies that “do it all” for clients needing large projects that cross many fields bring great scope to their clients. They tend to be expensive. Examples include Accenture, PricewaterhouseCoopers, Delolitte & Touche, Ernst & Young, McKinsey & Co., and IBM Consulting.

Midsized companies that have expertise in certain more specific fields of practice. Examples include Arthur D. Little, P.A. Consulting, and Bain & Co. These firms generally have most or all of the experience and reputation that the large companies do, within their own particular field of focus.

Small companies abound: Each of these thousands of experienced, but limited sole proprietorships or partnerships has its own sharp domain focus. They generally lack the breadth to take on larger assignments. But the fees for these boutiques are generally modest in comparison with rates charged by the large and midsize firms.

Any consulting engagement, large or small, obligates the client (you) to oversee the project throughout its development. And all of the above categories play a vital role in America’s effort to strengthen our economy and competitiveness through management and technology services.

Defining the Project

Let’s say that you need to engage a consultant, but don’t have anyone in mind that might solve your needs. How do you begin? Generally, consultant arrangements are more personal than contracts between companies. Here are three basic steps for success:

First, conceive your project in terms of three key points: (a) a clear statement of the work’s scope, deliveries, and performance expectations; (b) the period of performance, and (c) time and budget, and just what specifically constitutes project completion. This is the time for you to consider alternative business strategies for your project.

If the project is at all complex, then you should prepare a formal proposal, with sign-offs from your stakeholders. Commitments and understandings must be crystal clear in writing to both parties as to the timing, costs, documentation, testing results, etc. that are expected. If the job requires new ideas, technologies, or other unknown elements, you must be careful from the very beginning and address them up front.

Do you really need an outside consultant, or should you defer to your inside counsel instead? Might you require a consultant only for a part of a larger project, or for the entire project, and why? What are your potential risks?

If your project is a large one, consider creating an ad hoc project committee to oversee the project, and to hold frequent project reviews. This will help rein in any drifting from the plan. If possible, give your main issues time to ferment before taking action. Are there benchmarks available that may give you further guidance? Take the time needed to grow strong roots under your plans.

Your project should proceed on schedule, with changes of scope and methods only to be agreed upon mutually. Budgets tend to creep—a temptation for any complex project. It is the responsibility of both the client and the contractor to ensure that the project risks are carefully managed.

These are the hard factors. Behind them are the soft factors, such as trust, cooperation, and respect between you and your consultant. They determine in large measure the success of the outcome; without them little can be achieved.

Deciding on the Consultant

Next, make your key decision for selecting your consultant. Do you need a small boutique, or a larger full-service firm? Most consultancies specialize, such as in strategy, operations, testing, etc. Some engagements require detailed work; others, only oversight.

Small consulting firms generally don’t have the capacity to tackle larger engagements. Large consultancies generally have a wider span of expertise, but tend to be expensive, and may not be really effective in executing smaller jobs. Local firms often offer a better alternative than larger companies for narrow projects. Ask individuals in the consultant’s company whom they have worked with before on similar projects. Satisfy yourself that you are getting the best person or team available for your project. Ultimately, you own the responsibility for selecting your consultant and getting started effectively.

Here are four proven tips for success in working with consultants:

— Use a known, trusted, and experienced consultant with an established reputation, good referrals in your field of need, and with whom you work effectively. Do your diligence and get references from former clients. Beware of any disconnects between you and your consultant as to the field of expertise, fees, deliverables, timelines, and ownership of intellectual property. Most importantly, can you work together effectively?

— Your consultant must earn your confidence that the job will be done right, on time and within budget. Quickly repair any misunderstandings between you and your clients about fees as they arise.

— Be careful of unknown risk elements, including project timing and change of scope, constraints, technology, and disputes. In your agreement, provide a means for either side to terminate the relationship when it goes sour.

— Sign a formal agreement covering the cost, terms, and deliverables and stick to it unless, of course, there must be changes. Provide a means for changes in work scope to be made if this becomes necessary. Included in this agreement should be the specific terms and conditions regarding period of performance, elements of uncertainty, retainers, and dollars. The project agreement can be based upon a fixed price, on “time and materials,” or a combination of the two.

Your consulting team must execute the project so it is appropriate to your needs, criteria, and expectations. But, as always, the devil is in the details. Try to anticipate and avoid even small disconnects between you and your consultant on expertise, fees, outcomes, timelines, risks, ownership of intellectual property, etc. Is the job particularly risky for reasons of the technology, calendar, goals, scope, changes of scope, constraints, or other factors?

What tools or information are needed, if any? Are your needs and expectations, and those of your client, in synch with another? If there is any intellectual property to be created within this project’s intent, try to have your attorney look at it before the project begins. The issues here usually include the ownership of any new IP created, and who pays for the attorney. Agree up front exactly what constitutes satisfactory completion. But at the end of the day, both client and consultant must work together as a trusted team, meeting the needs of each.

Advice From the Street

The ABCs of consulting practices include ground rules within which the firms operate. To begin, you should to get to know your consultant in some depth—more than just a casual suggestion from a friend. Get your consultant’s curriculum vitae and more than one objective reference; probe into some of your consultant’s recent jobs, and check with their customers. Have a good discussion with this person, about experience and professional credentials. Inquire about the consulting firm’s experience. Discuss frankly the risks, and just how the consultant will keep on target with schedules, costs, and communication with you.

After all, you are the client, who must ultimately be responsible for changes of scope or approach. Are you comfortable, if not absolutely certain, that this investment warrants your time? Is this project a good investment for your company?

Consultants can, and should, wield considerable influence over their clients. Accordingly, select your consultant carefully as to reputation and expertise in your area of need, size, fees, and terms of conditions. And insist upon high ethical practices.

Clearly define the scope of work you need to be achieved, and provisions for changes as needed. If the project is large or complex, engage a competent attorney to draw up agreements to protect you. And quickly repair any misunderstandings as to fees, expertise, deliverables, project timelines, ownership of intellectual property, or any one of a multitude of disconnections before they interfere with the project.

Express your needs and expectations for the project. On the surface, industrial consulting may seem to be a smooth ocean. But just under the placid sea lurk many surprises and unintended consequences.

Here’s an example of just what can go wrong if your consulting agreements are not absolutely clear. A mid-level manager I knew in a company once made an agreement to engage an outside consultant to improve a minor piece of our overall supply chain process. He felt that that his “fix” would streamline a piece of the overall process. He turned this situation over to a trusted consultant, and then engaged his director for approval.

However, early on he failed to coordinate properly with the appropriate manager responsible for sourcing, procurement, and materials management. This misstep resulted in process confusion, which led to several unintended consequences: a trail of mounting receivables, inventories, and costs. The message: Small issues can easily grow and create real bedlam if they are not well managed.

Here’s another personal consulting episode that is instructive in a quite different way. Early in my career, I was hired as a consulting engineer for a major food corporation to design a large, domed concrete structure used for fermenting yeast. I did the structural design. But while still in the testing phase, a glitch in the electrical system sparked, which then literally detonated, ruining the facility. In the aftermath of what might have been a major human disaster, we soon found that the clients’ personnel had misused the electrical safety controls, which then occasioned the explosion.

There were no consequences other than capital and time. So, what’s the message? As a consultant or client, you simply can’t be too careful in the face of any potentially dangerous situation. Make sound provisions in your consulting agreement that will deal directly with such particular risks as may arise, so you can maximize your opportunities for success.

I believe that good consultants as a group rank among the top of any of the business professions. Generally, they are honorable, have personal integrity, and deliver what they offer. In my career, I have been both a consultant and a client, and experience has shown me that as a group, they rank among the highest of any profession I know regarding integrity.

Of course, it is the responsibility of you, the customer of their services, to have a serviceable agreement that works for both parties on two levels: personal and in writing.

Stay engaged! And if the work begins to drift away from your understanding, promptly redo your agreement with your consultant to reflect the changes in your arrangement. Put in writing any changes you may need. Any experienced engineer who’s been around can recall various experiences with consultants that have ended to some extent in failure.

Many of those failures trace back to poor communication or contract disputes. Strive to have honest and quick feedback, and recourse when things go south.

Working with consultants is generally quite different from working with employees. For one thing, you will never have full control as projects unfold. And beware: Managing a consultant isn’t for everyone. It takes special multitasking, technical, and political skills.

Many larger companies generally use cadres of talented internal staff consultants that do much of the work that outside consultants might otherwise take on. These experienced staff members tend to be recognized internally as vital, trusted, and “can-do” people. They work directly with operations staff in tackling difficult projects, much as R&D people support their company’s production operations.

Indeed, one important aspect of using industrial consultants is their agility in keeping all the balls in the air at the same time: safety, timing, finance, project management. It is indeed a difficult and delicate job.

Managing Your Consultant

The measure of success in working with a consultant, of course, is to get the project entirely and satisfactorily finished, within budget and on time, as expressed in the contract agreement. Here is where you must pay close attention; the details are crucial. You certainly should keep current about the progress of your project. Stay engaged. Pay attention whenever even a part of your project begins to stray off course. You want to rest assured; therefore, you are responsible for driving the issues and keeping the project on track to completion.

And, finally, make sure that all your commitments and understandings are mutually fulfilled in regard to project timing, costs, documentation, changes of work scope, testing results, etc. Good luck!

Phil Francis is an ASME Fellow and a former professor and department chair at the Illinois Institute of Technology. He has also been an engineering researcher at the Southwest Research Institute, and a senior executive at Motorola, Square D, and AT&T. He runs a small industrial consultancy in Georgetown, Texas, and can be reached at phil@groupfrancis.com.